Answers Provided to a Journalist, Regarding the Medical Insurance Year Change and the Related Standards Adjustments

(02.21.2008)

This April 1 initiates the third Medical Insurance Year of the Basic Medical
Insurance for Urban Employees in Shanghai. A journalist had an interview with
the office of the Shanghai Health Insurance Bureau regarding: the issues of the
Medical Insurance Year change, the adjustments of the Individual Medical
Account, the standards of clinical and emergency expenses at one’s own private
cost, the deductable and the cost ceiling of the Municipal Medical Insurance
Fund.

Q: When will the 2003 Medical Insurance Year begin and end?

A: It will begin at 0:00 AM on April 1, 2003 and end at 0:00 AM on March 31,
2004.

Q: What is the basis of the adjustments made to the clinical or emergency
treatments at one’s own private cost, the deductable and the cost ceiling of the
Municipal Medical Insurance Fund?

A: Based on the Shanghai Municipal Procedures of Basic Medical Insurance for
Urban Employees, the Individual Medical Account standards of clinical and
emergency expenses at one’s own private cost, the deductible of the Municipal
Medical Insurance Fund and the standard of the cost ceiling shall be adjusted
every year according to the average annual employee salary in Shanghai in the
previous year. Last year, given the short implementation period of the Shanghai
Municipal Procedures of Basic Medical Insurance for Urban Employees, only the
Individual Medical Account was adjusted based on the Shanghai Municipal
Procedures of Basic Medical Insurance for Urban Employees after approval by the
Shanghai Municipal Government, but no adjustment was made to the clinical and
emergency expenses paid at one’s own private cost, the deductible of the
Municipal Medical Insurance Fund and the standard of the cost ceiling.
Therefore, the related payment standards shall be adjusted simultaneously with
the adjustment made to the Individual Medical Account as required.

Q: What are the standards for calculating the Individual Medical Account in
the 2003 Medical Insurance Year?

A: The Individual Medical Account of any currently-employed person as a
Medical Insurance participant in Shanghai is composed of the part paid by
themselves and the part that is calculated according to the defined proportion
of the average employee annual salary in Shanghai; the Individual Medical
Account of any retiree is calculated according to the defined proportion of the
average employee annual salary in Shanghai.

In the 2003 Medical Insurance Year, the base to calculate the proportion of
the average employee annual salary in Shanghai complies with the Shanghai
Municipal Procedures of Basic Medical Insurance for Urban Employees,
specifically equaling the average employee annual salary (RMB 19,473.00) in the
previous year (year 2002). Therefore, the amount contributed to the Individual
Medical Account, according to the defined proportion of the average annual
employee salary in Shanghai, will increase. For example, the amount for retirees
aged less than 74 years will change from RMB 711.00 to RMB 779.00, growing by
RMB 68.00; the amount for retirees older than 75 years of age will change from
RMB 799.00 to RMB 876.00, growing by RMB 77.00.

Every currently employed person has a different actual amount in his/her
Individual Medical Account because of different payment amounts, but the overall
amount added into everyone's Individual Medical Account, according to the
defined proportion of the average annual employee salary in Shanghai, will
increase.

Q: How are the standards of clinical and emergency expenses at one’s own
private cost, the deductible of the Municipal Medical Insurance Fund and the
cost ceiling calculated in the 2003 Medical Insurance Year?

A: The Individual Medical Account standards of clinical and emergency
expenses at one’s own private cost, the deductible of the Municipal Medical
Insurance Fund and the cost ceiling in the 2003 Medical Insurance Year are
calculated based on the average annual employee salary (RMB 15,420.00) in
Shanghai in 2000.

For those retired before the medical reform, for those retired after the
medical the reform and for the currently employed persons, the clinical and
emergency expenses at one’s own private cost are RMB 308.00, RMB 771.00 and RMB
1,542.00 respectively.

The deductible of the Municipal Medical Insurance Fund is adjusted to RMB
771.00, RMB 1,234.00 and RMB 1,542.00 respectively,

and the cost ceiling of the Municipal Medical Insurance Fund is adjusted to
RMB 61,680.00.

Q: Will the standards of Medical Insurance for participants change, after the
Individual Medical Account, the standards of clinical and emergency expenses at
one’s own private cost, the deductible of the Municipal Medical Insurance Fund
and the cost ceiling are adjusted?

A: Given the acceptance of mass participants in this adjustment, the
Individual Medical account is added on the basis of the average annual employee
salary in Shanghai in 2002.

The standards of clinical and emergency expenses at one’s own private cost
and the deductable of the Municipal Medical Insurance Fund is added on the basis
of the average annual employee salary in Shanghai in 2000.

That is to say, a high base is applied in adding to the Individual Medical
Account, and low base is applied in adding to the medical expenses at one’s own
private cost.

In most cases in Shanghai, the amount added to the Individual Medical Account
is bigger than that added to the medical expenses at one’s own private cost.

Generally, it has little impact on the Medical Insurance standards of the
participant. Meanwhile, the rise of the cost ceiling of the Municipal Medical
Insurance Fund can also reduce the private expenses for heavy and severe
illness. The adjustment will have a certain impact on the low-income groups
suffering from sickness, so the related municipal administration will help with
further reducing their medical expenses by means of medical assistance measures.

Q: What specific medical assistance measures will be taken to assist the
low-income groups who suffer from medical issues?

A: To reduce the medical expense costs for the low-income groups, the
Shanghai administration will take further medical assistance measures including:

(1) The medical insurance institutions will help reduce the new medical
expenses at one’s own private cost by adjusting the "3 Standards" for the
low-income groups, to ensure every participant will not pay any extra. The
subjects of expense reduction include the insurance participants from low-income
families, the contracted insurance participants eligible for civil
administration subsidies, and those assessed as losing full or most working
ability by the Shanghai Municipal Labor Ability Assessment Center;

(2) enterprises and non-business institutions may spend less than 2% of the
total salary on helping those low-income employees accumulating medical expenses
at their own private cost. Presently, an Employee Medical Help Fund has been
established in the majority of organizations, and the authorities and
administrations in charge of the organizations support and encourage the
remaining organizations to establish their own Funds as soon as possible; and

(3) if the medical expenses are still hardly affordable for the employee
after the assistance of Medical Insurance and the related enterprise or
non-business institution, or the related enterprise or non-business institution
cannot help in certain circumstances, the Civil Administration will coordinate
the related groups to provide assistance.

Q: Through which channels can employees get an in-depth understanding of the
policies related to Medical Insurance?

A: The municipal and district/county medical insurance administrations will
provide the ways through 3 specific channels:

(1) The consultation line of the municipal and district/county medical
insurance administrations;

(2) the Shanghai Medical Insurance website: www.shyb.gov.cn, and

(3) the municipal and district/county medical service windows where medical
services staff provide consultations and additionally all related written
documents.